FHFA Issues Proposed Rule on Fannie Mae and Freddie Mac Duty to Serve Underserved Markets

The Federal Housing Finance Agency (FHFA) is seeking comments on a proposed rule to implement the Duty to Serve provisions of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the Housing and Economic Recovery Act of 2008.

This statute requires Fannie Mae and Freddie Mac (the Enterprises) to serve three specified underserved markets: manufactured housing, affordable housing preservation and rural markets. The proposed rule would require the Enterprises to adopt plans to improve the distribution and availability of mortgage financing in a safe and sound manner for residential properties that serve very low-, low-, and moderate-income families in the three specified underserved markets.

The proposed rule would provide Duty to Serve credit for eligible Enterprise activities that facilitate a secondary market for mortgages on residential properties in the specified underserved markets. It would also establish a method for evaluating and rating the Enterprises' performance each year, on which FHFA would report annually to Congress.

Each Enterprise would be required to submit to FHFA an Underserved Markets Plan covering a three-year period that describes the activities and objectives it will undertake to meet its Duty to Serve.

For the manufactured housing market, Duty to Serve credit would be provided for eligible Enterprise activities related to manufactured homes financed as real property and blanket loans for certain categories of manufactured housing communities.
For the affordable housing preservation market, Duty to Serve credit would be provided for eligible Enterprise activities related to preserving the affordability of housing for renters and homebuyers, including activities under the programs specified in the Safety and Soundness Act. Duty to Serve credit would also be provided for activities related to existing small multifamily rental properties, energy efficiency improvements on existing multifamily rental and single-family first-lien properties, shared equity homeownership programs and the U.S. Department of Housing and Urban Development's Choice Neighborhoods Initiative and Rental Assistance Demonstration program.
For the rural market, Duty to Serve credit would be provided for eligible Enterprise activities related to housing in rural areas, including activities serving the following high-needs rural regions and populations: Middle Appalachia, the Lower Mississippi Delta, colonias, members of a Native American tribe located in a Native American area, and migrant and seasonal agricultural workers.FHFA would provide an Enterprise Duty to Serve credit for additional eligible activities identified by an Enterprise in its Underserved Markets Plan for the specific underserved market. Qualifying activities that promote residential economic diversity in one or more underserved markets would also receive Duty to Serve credit.

FHFA invites interested parties to submit comments on all aspects of the proposed rule within 90 days of publication in the Federal Register via FHFA.gov. The public comment period commences and public comments may be submitted upon publication of the proposed rule in the Federal Register.

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